ab359 wrote:

- quote -

You have partially misinterpreted the definition of two
years. The exemption from the substantial presence is for
two calendar years. If you entered the US in August, 2002,
then calendar year 2002 is your first year and 2003 is your
second year. You would start to count days of presence
starting on 1/1/04. That makes you a resident for tax
purposes in 2004.

Treaties usually have a savings clause that allows the
country in which you are a resident to tax you regardless of
the treaty benefit. The Israeli treaty has a clause that
specifically exempts teachers, students, scholars, etc from
the savings clause. Therefore, the two year income exemption
starting from the arrival date in 2002, would be applicable
to you. Any income paid to you by the school for your
personal services up until your two year period ended in
Aug. 2004 would be exempt from taxation. You could exclude
that amount of wages from Line 7 of the tax form. As you
are a resident alien in 2004, you must complete Form 8833
(Treaty Based Return Provision) to explain why you excluded
the wages. You would need to cite the paragraph and article
number in the treaty that provides the two year exclusion (I
assume Para 1 of Article 23) and Paragraph 4(b) of Article 6
that provides the exemption from the savings clause.

--
Alan
http://taxtopics.net

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->

I am on J-1 scholar Visa status
According to the substantial presence test I must file as a
resident alien for the entire 2004. However due to Tax
treaty with Israel I was exempt from tax for my first 2
years of stay in the US, which ended on Aug. 2004. This
means that for 2004 I received both W-2 form (reporting my
taxable salary from Aug.) and also 1042-S form (reporting my
tax exempt compensation till Aug.). How can that be dealt
with in the tax form submission?

ab359[at]cornell.edu

<< -------------------------------------------------> << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org > << ------------------------------------------------->